On July 3rd, the House of Representatives passed the One Big, Beautiful Bill Act (OBBBA; H.R. 1) in keeping with President Trump’s desire to pass it by July 4th. It has now been signed into law, and is, simply put, the largest tax bill that has ever been passed.
This 870-page bill carries with it a host of tax implications. Much of the impact comes from provisions in the Tax Cuts and Jobs Act which were set to sunset at the end of 2025 but are being made largely permanent (with some changes). As this bill is quite complex, this post will provide a quick summary of the provisions that we feel will most significantly affect you (our client), your family, and/or your business.
We will list both individual and business tax implications, broken out respectively into provisions that will take effect in 2025 and those that will take effect in 2026.
Individual Tax Provisions Effective 2025:
- Changes to the Standard Deduction Amounts:
See the table below outlining previous standard deduction amounts compared to amounts under the OBBBA.
| Table Header | Table Header | Table Header |
|---|---|---|
|
Single |
$12,950–$13,850* |
$15,750 |
|
Married Filing Jointly |
$25,900–$27,700* |
$31,500 |
|
Married Filing Separately |
$12,950–$13,850* |
$15,750 |
|
Head of Household |
19,400–$20,800* |
$23,625 |
|
Qualifying Surviving Spouse (QSS) |
$25,900–$27,700* |
$31,500 |
*TCJA amounts were adjusted annually for inflation (e.g., $13,850 for single in 2023).
- TCJA Tax Rates Extended:
Individual rate reductions (from the 2017 TCJA) are no longer set to expire in 2025. TCJA’s lower tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) remain in effect, with an extra year of inflation adjustment. - SALT (State and Local Tax) Deduction Caps:
Temporary increase in the deduction limit for payment of state and local taxes (SALT cap) from $10,000 to $40,000, subject to phaseout for high-income taxpayers. This will be adjusted by 1% for inflation annually until 2029 and revert to $10,000 in 2030. There are no restrictions for pass-through entity tax elective taxes. - Qualified Small Business Stock (QSBS):
Three significant expansions to Section 1202 regarding qualified small business stock (QSBS) benefits. This will reduce the required holding period from 5 to 3 years, increase capital gain exclusion from $10 million to $15 million, and increase the gross asset limit from $50 million to $75 million. - Child Tax Credit:
The Child Tax Credit is permanently increased to $2,200 per child, with inflation adjustments beginning in 2026. - Temporary Deductions:
- Temporarily allowance for the deduction of up to $25,000 of qualified tips received in an occupation that customarily and regularly receives tips from 2025-2028.
- Temporary deduction of up to $12,500 ($25,000 for joint returns) of qualified overtime compensation received in a given tax year, which phases out beginning with MAGI over $150,000 ($300,000 for joint returns).
- Temporary deduction for interest on U.S. assembled vehicle loans up to $10,000, phased out at $125,000 AGI for individuals ($250k for joint returns).
- AMT Exemption:
Increased exemption and phaseout thresholds made permanent. - Estate & Gift Tax and Generation Skipping Transfer Tax (GSTT):
Remains at the current $13.99 million for 2025. - Clean Energy Credit Terminations:
- Termination of Clean Vehicle Credit (09/30/2025)
- Termination of Solar Credit (12/31/2025)
Individual Tax Provisions taking effect in 2026:
- Child Tax Credit:
Inflation adjustments begin for the $2,200 credit. - Estate & Gift Tax and GSTT:
The unified credit for estate and gift taxes and the generation-skipping transfer tax (GSTT) exemption are both permanently increased to $15 million per person, indexed for inflation, starting in 2026. - Charitable Deduction for Non-Itemizers:
Up to $2,000 (joint)/$1,000 (other filers) allowed starting in 2026. - Charitable Deduction Floor:
0.5% AGI floor for itemizers begins in 2026. - Senior Deduction:
$6,000 deduction for taxpayers 65+ available through 2028, phased out at higher incomes.
Business Tax Provisions taking effect in 2025:
- Bonus Depreciation:
Reinstatement of permanent 100% first-year “bonus depreciation”, available for qualified property acquired and placed in service after January 19, 2025. - Section 179 Expensing:
The Section 179 deduction cap for investment in qualified equipment and certain other assets was increased from $1 million to $2.5 million with a phaseout threshold at $4 million, both indexed for inflation after 2025. - R&D Expensing:
Immediate deduction or varied amortization strategies for domestic research and experimental expenditures is made permanent for tax years after 2024; retroactive relief for qualified small businesses for 2022–2024. - Interest Deduction (Section 163(j)):
Calculation of interest deduction reverts to the original TCJA method, allowing businesses to compute adjusted taxable income without subtracting depreciation, amortization, or depletion, increasing allowable interest deductions. - Excess Business Loss Limitation:
Permanent extension of the TCJA’s excess business loss limitation for non-corporate taxpayers. - Reporting Thresholds:
1099-K threshold raised to $20,000 and 200 transactions. 1099-NEC/MISC threshold raised to $2,000 (indexed). - Clean Energy Credits:
Elimination of several clean energy credits for businesses, including commercial clean vehicle and energy-efficient property credits, generally after 2025.
Business Tax Provisions taking effect in 2026:
- Charitable Deduction Floor:
1% floor for corporations’ charitable deductions begins in 2026. - Qualified Opportunity Zones:
Permanent renewal (with some modifications) of the QOZ program, which offers tax incentives to investors who invest deferred capital gain in qualified opportunity zones. The new policy will establish rolling, ten-year designations starting January 1, 2027. This was set to expire in 2026. - Expanded QBI Deduction:
Effective in 2026, the 20% deduction for QBI (Section 199A) from Sole Proprietorships, Partnerships, and S Corporations is made permanent, with further QBI phase-in and inflation adjustments to phaseout thresholds for specified service trades or businesses. - Base Erosion and Anti-Abuse Tax (BEAT Rate):
The BEAT rate that was set by the TCJA was 10% with a scheduled increase to 12.5% in 2026. The OBBBA instead sets the rate at 10.5% for tax years after December 31, 2025. - International Tax Provisions:
The OBBBA modifies and makes permanent expiring foreign tax credits from TCJA.- The “global intangible low-taxed income” (GILTI) was renamed the Net CFC Tested Income (NCTI), and beginning in 2026, the deduction percentage will be 40%.
- The “foreign-derived-intangible-income” (FDII) was renamed the Foreign-Derived Eligible Income (FDDEI), and beginning in 2026, the deduction percentage will 33.34%.
- Additionally, the OBBB establishes a 10.5% rate for the base erosion anti-abuse tax (BEAT).
If you have specific questions about this bill as it relates to you and your circumstances, do not hesitate to reach out to your preparer or our main office, and we will gladly partner with you to successfully navigate these changes.
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